making unless washington acts. $7 trillion in across the board tax hikes and spending cuts over the next decade mandated to begin in january. it's the legislative equivalent of a slow motion train wreck that washington can avoid. the question, will congress and the president drive that train over a cliff? >> we won't solve the problem of our fiscal imbalance overnight. >> the elections are over. the threats to our economy are not. time to get to work. and there is lots of work to be done. starts with averting the disaster of our own making. i repeat that. the fiscal cliff. we've got it covered frommive angle. christine romans is host of "your bottom line," richard quest of "quest means business," david walker spent a decade oversaeg the federal government, how it spends your tax dollars as the u.s. comptroller general. today he's the ceo of come back america. he's an unapologetic deficit

hawk. mohammed al arian is the ceo of pim he could. his firm is the largest investors in bonds. and stephen moore is the founder of the low tax advocacy group club for growth. i'm going to start with you, stephen. my good friend, the fiscal cliff is the immediate threat both parties need to come together to fix it because not fixing it would set even conservative fiscal causes back, don't you agree? >> yeah. i think most republicans agree. they don't want to go off this fiscal cliff either, ali. i think the one hang-up in negotiations which will start on tuesday is the president says, look, i was re-elected to raise those tax rates on the rich. you know what the republicans are saying in the snous you no he what? we were reluctant not to raise the tax rates. i think if the president takes the tax rate increases off the table, you can get an agreement on entitlement reform, getting more revenues and doing some kind of honest to goodness common sense things to get this deficit under control.

>> right, and i can grow a head of hair and look like brad pitt soon. in a letter you called congress dysfunctional and you wrote to the president. you can mobilize the nation to put proper and timely pressure on congress to cooperate. how? >> i'm being very open about our outlook and the dangers for employment, for living standards, for income and equality if we don't deal with our underlying problems. and secondly, by going forward. the fiscal cliff is a perfect example. like you say, ali, this was a problem of our own making. if we're not careful, this will throw us into recession. that's the last thing we need. the president can take a leadership role like stephen said, they'll find compromise. i'm not sure they should exclude the top income. i think everybody should contribute to the solution.

they will find a mini barringian. then we have to pivot to really bigger issues that are key to this economy growing over time and getting fiscal sustainability over time. >> david, in the simplest terms, the fiscal cliff means $7 trillion. a combination of things expiring, taxes going up. over the course of a decade. i want to be serious about had without being fear mongering. it is serious. that might sound like a dream scenario to a deficit hawk like you. wow, we're going to get rid of $7 trillion over ten years. why don't you love this idea of going over the fiscal cliff? >> we must not go over the fiscal cliff. it would cause us to go back into recession, exacerbate our unemployment and underemployment numbers, undercut confidence in government and potentially undercut at built to be able to get a grand bargain. we need to do a down payment. we need to extend most of the major tax provisions and spending reductions to set up a grand barringian in 2013. and the president needs to show extraordinary leadership and go directly to the people with the

facts, truth, and tough choices. he should call congress back and say no deal, no break. you don't get any days off other than weekends until we have a deal on the fiscal cliff. we ought to do the same thing in 2014 for our fiscal grand bargaining. >> richard and christine, that means we don't get days off either. what david is saying, this is a guy david has been pressing for a very long time to be responsible about government spending. he is saying if we go over that fiscal cliff, it does start to look more like greece. you have an economy that plunges. you have gdp that plunges and you don't have a way to dig out of that. >> if you do go over the fiscal cliff think don't think anyone on this program thinks will happen, really, if you do go over the fiscal cliff, you'll suffer the consequences. the world will suffer the consequences. there's no doubt. what worries me is a mini bargain that fudges the cliff for a moment but does nothing to fundamentally start to address

the bigger problems. >> why would you be worried about that? >> because we're at crunch moment. i don't think getting back from the fiscal cliff is going to be that difficult. the moment the reality hits, everyone concerned, common sense will prevail. but what happens after that? >> christine? >> washington showed such terrible leadership in this. it's really horrific. ali, they say it's not going to happen. they don't know how we're going to get there. they also don't team so get even a few days off the fiscal cliff is enough to really hurt stock markets. to really hurt business sendment. there are people now on the left -- we've been talking so much about the right, how they will not give in on their taxes. there are people saying let's go over it. it's going to really hurt the republican donors, the republican interests. the president caved twice. he can not gave again. even a few days off the fiscal cliff. even a few days off the fiscal cliff could spark a financial crisis. >> right. >> you just don't play with that

fire. >> do you remember the day in 2008 when t.a.r.p. failed in the house and the dow plunged 777 points? >> they didn't get it then. the market was telling them, the world is looking at you, america. you're a bunch of fools. then they got it. and then they spent the next four years denying they ever bailed out the banks. the point is that they don't get that it's not really up to them. it's up to them to make sure the rest of the world does doesn't completely lose confidence. >> what this comes down to, we think it's not going to happen. we hope it doesn't happen. it does come down to a very basic decision about who pays more taxes and what benefits stay and what go away? john boehner, speaker of the house, says republicans will accept higher tax revenues but not higher taxes. huh? more when we come back. there are a lot of warning lights and sounds vying for your attention.

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the stakes could not be higher. if the united states goes over the fiscal cliff, taxes will rise for nearly 88% of americans next year. we're talking about an average increase of $3500 per household. at the same time, $100 billion in automatic across the board spending cuts will take effect. half in defense, half in nondefense. and millions of jobs could be lost. the nonpartisan congressional budget says unemployment will jump back to 9% next year and the economy could be plunged back into recession. avoiding the 'tis call cliff will require compromise, something in short supply in washington. stephen moore joins me again. john boehner will accept higher tax revenues but not higher tax rates. explain that. >> you do that two-ways. it's no the that kblikted. first, you have to get the economy growing faster. we all agree that the best way to bring this deficit down is to get the growth back up to 3% to

4% to 5%. number two, when we talk to republicans, what they tell me, ali, i had a discussion with mitch mcconnell on this, he said we're willing to put the high revenues on the table. we're willing to get -- close the loopholes and the tax system, get rid of a lot of the carveouts. and a lot of those carveouts the people who benefit from those are rich people. i think republicans are willing to compromise on this. i have to say this. i'm frustrated with all of you on this because, yes, we have a fiscal cliff that's going to hit on january. but let's not forget the whole context of this. we are running $1.2 trf did he ever sits. >> david walker is banging on this drum as well. >> the key is we have to avoid the fiscal cliff. we also have to address the much bigger fiscal abyss. those are the large and growing structural deficits due to known demographic trends, rising health care cost and outdated

tax system. here's got news. the people are way ahead of the politicians. i just came back from a 34-day, 10,000-mile tour. we got 77% support for a range of reforms dealing with spending, social insurance programs and taxes. 85% believe it's going to take spending reductions and additional taxes heavily weighted towards the spending reductions. we just need leadership. >> right. it needs to be done in a responsible way. let's bring mohammed in. tell me how you see this. we heard from john boehner. we heard from the president. we are as yet lacking details. it seems to me we're already further ahead in this conversation than we've been in the last six months. where do you see this going as a guy who looks at the credit risk of everybody in the world? >> so i would extrapolate from our own experience here in california. we voted for higher taxes in order to fund better education. i think people are recognizing that fiscal sustainability has a num rater and a denominator.

the denominator is about growth, making sure can you grow living stands ardz and pay off debt. i think the realization is coming in that we need to optimize both and i think that our politicians will slowly get that. it's not going to be a big jump. i think richard quest is correct in reminding us that this is a long haul. let's focus both on the num rater and the denominator. >> the point, stephen, has just made and mohamme points out as well, you cannot have it both ways. >> right. >> you cannot remind us on the one hand that there's a $1.8 trillion deficit. but then immediately say we won't have tax revenues raised. you cannot have your cake and eat it, too. >> this is america! we've been doing that for 25 years! >> i know! >> that's exactly the problem. you know, going into the

negotiations saying ahh! we have to do something about it. but we won't raise tax rates. well, we must deal with the deficit. you can't do it. it's cake and eat it. >> i can make a point about, look, think about simple rules. that is $4 trillion in cuts through the year 2020. cuts and tax increases. you look at the fiscal cliff. that is $7 trillion in ten years with no thought, no nuance, no kind of strategy about what's the best for america. >> it's a sledgehammer. >> it's a big, dull hatchet when we need a sexual pep a a bunch of surgeons. that's the problem here. they need -- going off the fiscal cliff, and it is popular now to say maybe we should go off for a while -- >> that is gaining popularity. stephen moore, you and david have really spent a lot of time on this. your approaches to this are a little more certain. a lot more surgical. isn't that problem though, stephen? as david said, went around the country and talked to people. i found the same thing when i

was on the cnn express on that bus trip. people understand what this means. they understand that we have to cut back on our spending. they are concerned about the lack of sophistication with which washington is handling this. >> yeah, but when? look, i get so sick of it. everybody says we have to cut spending. even my good friend david walker who i have so much respect for. david, when are we going to cut the spending? the answer always seems to be we'll do it tomorrow, next year, the year after. that maybe it's not such a bad thing if we start right now. i'm not so opposed to 10% across the board in the spending programs. by the way, mohammed, i have to say this. you know, you say the tax cuts aren't going to hurt the economy. my goodness, look at your state of california. the ding bats in california just raised the highest income tax rate to 13%. every business and high income person is going to move to texas which by the way is the fastest growing state in the country which has no income tax. so i think tax rates do matter. i think the evidence is strong on this. and i don't want to see the united states go down the route of california. because california is the state

that is looking like greece right now. >> hold on, everybody wants to respond to that. but we at cnn want to be fiscally responsible and pay the bills. so that's what we're going to do for the next two minutes. we'll come back and hear from mohammed about that and from david walker. stay with us. you're watching a very animated edition of "your money." if we want to improve our schools... ... what should we invest in? maybe new buildings? what about updated equipment? they can help, but recent research shows... ... nothing transforms schools like investing in advanced teacher education.

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i got the panel back. stephen moore points out that california's a bad example because state tax rates are so high in order to pay for the investments they made. your response? >> so i will say to stephen, do the math. just do the math. everybody agrees that in order for us to improve our prospect, we need the following -- we need tax reform. we need entitlement reform. >> right. >> in order to close our gap, we also need certain tax rates to go up. and we need certain spending to be cut. and finally, in order for this to be sustainable, we need to

wrap it up with other issues and address our ability to grow. the labor market, credit, inf infrastructure. i will tell you it's not about a partial solution, it's about a wholistic solution that is going to involve a lot of steps, including higher tax rate. that is what the math tells you. >> so, david, stephen moore says when are we going to deal with it? the issue with the fiscal cliff is less, when, and more how? >> on the fiscal cliff, for example, can you not extend the payroll tax cut. that's over $100 billion. you can recognize that 99 weeks is enough for unemployment benefits. you can reach a compromise with regard to some defense and nondefense spending without doing the hatchet. then what can you do is set up a bridge to a grand bargain to where we're focusing on getting debt to gdp down to 60% within 10 to 12 years which will require everything we're talking about. budget controls, social insurance reforms, comprehensive tax reforms, additional defense and spedding nding reductions.

it's possible to do that with leadership. >> david, you've been talking about this for so long. nobody listened then. not nobody listened. people listened. decision makers in washington didn't listen. i mean what -- will they listen this time? >> i think they will listen this time. the number one issue for americans was the economy, jobs, and fiscal responsibility. what we need to do, as i said, is that president obama needs to take a page out of president clinton's book. he needs to use the bully pulpit. we need a meaningful education campaign. we need to demonstrate on the far right and left. he wants a deal. i think boehner wants a deal. >> stephen boar, do you think president obama wants a deal that you'd be satisfied with? >> i don't know. i honestly don't know. i think if barack obama will move a little bit of to the middle, i think republicans are -- look, we all are americans first and foremost. we want to get these problems

solved. >> let's say president obama moves to the middle but still says that the top 2% pay higher income taxes. >> the republicans will not go along with those higher tax rates. that's world war iii. if he's willing to say we can close loopholes and do other things but i just -- i think republicans honestly believe, and i agree with them on this, that raising the tax rates is going to hurt the economy more than it's going to bring down the deficit. you know you're the one who always said, jobs is number one. you're not going to create more jobs by putting higher taxes on businesses. >> richard, you are scribbling furiously here. >> no. no. no. that's what he wrote. good i'm not saying no, no, no, no. i'm saying no to higher tax rates. >> i'm saying, look, you have an advantage here in that you're trying to put this -- you're trying to put humpty dumpty together before he fell off the wall. >> metaphor number six of the program, by the way. >> what we learned from europe is you don't want to wait for him to fall off the wall. the markets will do your job for

you. >> right. >> austerity and -- we may have overdone austerity in europe. >> really? we may have. >> and we're paying the price for it in greece and spain is about to get hit and italy is about to get hit. but you have the chance to do it with the warning beacon flashing. if you do not do it, if you do not deal with this deficit and the long term, i agree with stephen, you do need to deal with the trillion dollar plus deficit sooner rather than later, then somebody, ie the markets, ie investors because that's the big difference, ladies and gentlemen. china is now a bigger player in the global economy than it was before. >> right. >> you're in new territory. >> here here. >> the rules of this game have changed. >> we have to keep in mind if you use honest and comparable accounting, the total government debt as percentage of the economy today in the suits worse than every country in europe but one. and it's called greece.

and we don't want to follow their example. we've got to deal with these structural deficits. but we're not going to deal with them in a lame duck session. let's do a down payment. let's do a bridge to a grand bargain. we need to focus on debt to gdp. that's what matters. and after all, after world war ii, we went from over 100% of debt to gdp down to the 30% range and we didn't pay off a dollar of debt because we constrained deficits and had fiscal responsibility and we grew the economy. that's what we need to do. >> we continue to speculate here at cnn that someone might ask you to be a treasury secretary of the united states. >> where he starting this rumor? >> you continue to say that's not true. we would like to hear your closing words on. this you're the ghi is going to -- you're going to lead the charge on deciding whether or not investing in the united states is a good bet or a bad bet. you're still on the good bet side? >> yeah, i am. we expect the following to

happen. so we talked a lot about what should happen during this program. let's speak to what's likely to happen. what's likely to happen is our politicians will come together. they will meet in the middle on some issues resulting not in a 4% to aperio5% fiscal contracti in a 1.5% fiscal contraction. the next step is the more difficult one. it's what richard has spoken to which is to pivot, not just remove the head wind, but prevent tail wints and growth. that's going to require a lot of hard work. but we think it's feasible over time. in the meantime, let's remember that europe is getting worse, not better. let's remember that china is slowing. let's remember the middle east is becoming less stable. and, therefore, we have no time to wait. we have to move forward. >> mohammed, excellent. thank you so much for joining us. ceo of pimpco, stephen moore,

david walker, christine is the host of "your bottom line." richard, stay where you are. things are about to get much more interesting in washington. richard quest and i will get into a very civilized argument about america's future next. questions? anyone have occasional constipation, diarrhea, gas, bloating? yeah. one phillips' colon health probiotic cap each day helps defend against these digestive issues with three strains of good bacteria. approved! [ female announcer ] live the regular life. phillips'.

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do i smell snickerdoodles? maybe. [ timer dings ] got to go. priority mail flat rate boxes. online pricing starts at $5.15. only from the postal service. same president, same challenges for the economy but the next four years and more importantly the next 2 1/2 months will be very different. the election was a turning point and now things get interesting. joining me now in studio to debate this is richard quest, the host of "quest means business" on cnn international. he's the tall guy with the big ears. good to see new person. you're taller and have bigger ears in real life. richard and i are old friends. this is what we do. q&a. question, ali, this time it is more of a fill in the blank. so the election is over. now it gets interesting because of what? richard? you traveled all this way to join me in new york.

so you go first. 60 seconds as you start it on the bell. >> 60 seconds on now it gets interesting. now, ali, it gets interesting because nothing has changed. just think about it for one moment. the fiscal cliff remains. and the united states is getting ever closer to going over the edge. but worse than that, the european sovereign debt crisis continues. greece still hasn't had its latest charge of money. the situation in spain is deteriorating. china is slowing down. and as carl yonker said in europe, everybody knows what needs to be done. everybody knows what needs to be done. they just can't get re-elected if they do it. worse than that, if they actually do it, they could find themselves to be in deep political trouble with their own party. so, now it gets interesting

because -- it gets interesting because the stakes are so high. whether it's in europe or the united states. either side could have an accident which would ultimately pull them over the edge. now it gets interesting, ali, why? >> now it gets interesting because everybody has got to grow up. president obama, the second term, it's about legacy, nothing ruins a legacy like presiding over an economy that plunges into recession. but president obama doesn't have to run for office again. the 435 members of the house of representatives do along with about 33 senators in two years. so it's time now for the children to leave the room. i say that at risk of insulting real children who tend to behave more responsibly than some of your elected officials have. will republicans backed up by a ridiculous pledge to not raise taxes by a weakened tea party and licking their wounds after a

general repudiation of conservative fiscal policies depart from that principle loaning nouf to achieve that grand bargain? richard that, is anybody's guess. but if they do, things will really get interesting because despite what you say about things being exactly the same, the same makeup of congress, the same president, i think they're very different. >> now it gets interesting. >> it absolutely does. and that's our wish list. but, of course, if you and i had any real influence, we wouldn't actually be here. so am kog up next, you're going to want to stick around for. this i'll introduce you to one of most influential and i think dangerous men in washington. he could ultimately be responsible for taking the u.s. eefr t over the fiscal cliff and he's not even elected. [ abdul-rashid ] i've been working since i was about 16.

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if the u.s. falls over the fiscal cliff, 88% of american households will see their taxes go up. you would think that republicans in congress who signed this pledge to not raise taxes would be tripping over themselves to solve the problem but they can't. i'll go one-on-one with the biggest impediment to compromise in washington back in 90 seconds.

the most immediate threat facing the united states is the fiscal cliff and the election results did nothing to change the balance of power that we have seen in washington in the last two years. a democratic president now re-elected calling for taxes on the richest americans to rise. a republican controlled house of representatives that opposes any increase in tax rates and a democratic senate caught in the middle. now avoiding the fiscal cliff will require compromise. there is no compromise possible when one side says they can't lose. everything has to be on the table to succeed all parties need to give something up for the greater good. but there is a problem. it's a big problem. almost all the republicans in congress have signed a pledge, a pledge not to vote for any net tax increases under any

circumstances. it is a pledge authored by grover norquist, the founder and president of americans for tax reform. let me read the pledge to you. i reads as follows, i -- blank, pledge to the pachl taxpayers of the blank district? the state of blank and to the american people that i will one, oppose any and all efforts to increase the marginal income tax rate for individuals and businesses and, two, oppose any net elimination of reduction or elimination of deductions and credits unless matched dollar for dollar by further reducing tax rates. the current congress the one in place until january, 238 representatives and 41 senators signed. by the way, one senate democrat, ben nelson of nebraska and two house democrats, robert andrews of new jersey and ben chandler of kentucky have also signed it. neither nelson nor chandler be in in the new congress. the people who won their seats have also signed the pledge. interestingly, six house

republicans did not sign the pledge. all but one will be in the next congress. pennsylvania congressman todd plat retired. he'll be replaced by republican scott perry who also didn't sign the pledge. seven republican senators in the current congress didn't sign the pledge either. two of them won't be around for the next congress, indiana's richard lugar and maine's olympia snow who is leaving the senate. joining me now is grover norquist, the author of the pledge and one of the most powerful fiscal conservatives in the country. grover, welcome back to the show. thank you for being here. first of all, i want to ask you, where does your group, americans for tax reform get its money? who is behind this effort for this pledge? >> well, the pledge doesn't cost any money. we have 100,000 donors if that's your question. but the pledge doesn't cost any resources. we share it with people. and they make that commitment to the american people. as you pointed out, we have a

majority in the house that's committed to not raising taxes. the leadership of the house and senate republicans made this commitment to the american people. >> if the pledge doesn't cost any money, then why did american cross roads gps give you $4.5 million? >> oh, well they were supportive of our efforts in campaigns and so on, sure. >> so that's -- >> the pledge itself doesn't cost any money. >> i understand. only photocopying costs i guess. the only question is -- >> we use e-mail. >> what happens to people who break the pledge? those 238 in congress, what happens if they break the pledge? you got money behind these. you pile on and try to get them defeated in the next election? >> the best example of that is george herbert walker bush who ran for election in 1988, signed the pledge, won the primary, said read my lips and signed the pledge and won the general election. then two years later he walked into a grand bargain with the democrats who promised to cut spending if he would raise taxes. taxes were raised. spending was not cut.

spending increased. and he lost the next election. we didn't run any adds against bush. the whole country knew that he had been taken to the cleaners. he promised not to raise taxes and didn't keep his commitment. so tease are self enforcing. why? because the american people elect people who they want to reform government rather than raise taxes. >> i like to think it's that pure. the fact is you have a lot of money. the money has to be used for something, right? you can't get $4.5 million from these guys and $200,000 from here and here for nothing. it doesn't cost that much to get the pledge out. how does the money get spent to defeat people who break the pledge? >> we run ads to let people know who is taking the pledge and who doesn't. we'll do phones and to letting people know who is taking the pledge and hasn't. now if liberals believe that being open to tax increases is a popular thing, then they should consider our advertising, letting them know that somebody's open to tax increases to be a campaign contribution to

them. they seem to know better than that though. >> let's switch to the economics. our gdp growth rate is 2%. we have the lowest tax rates in the united states that we've had for 30 years. how do you connect the tissue? we have the lowest tax rates in 30 years in america. and, yet, we've only got a 2% growth rate. how does that argue that yet lower tax rates will create for broej? growth? >> first of all, we had a 28% marginal tax rate in 1996 up in until 1990. so we actually a top rate of 35%. we have a significantly higher tax rate than we had -- >> when tax revenues are low? >> of course they are. the total tax burden is lower because if we had a growth rate like reagan's, a recovery, a strong recovery -- >> greater than 4%? >> there would be ten million americans at work if we had reagan's level of recovery.

who are not at work now. they'd be paying taxes. >> like if i had a full head of hair, i had would look like brad pitt. >> with a top tax rate that aeb wants to take to 43, 44% with a tsunami of regulations and an attack on energy, they want an energy tax. something they didn't mention during the campaign. there is a whole series of damaging things. the market see this is is not exactly a healthy plan for the economy. of course you have a lousy growth rate as long as you have democrats threatening to throw tax increases on the economy. in addition to the regulatory burden, you've got french rates of economic growth. >> all right. but let's say we let the bush tax cuts expire at the end of the year and then congress moved to increase tax rates? would that count? would that violate the pledge? >> that would clearly be -- you gont to the american people and say we raised taxes $500 billion and then we cut it $400 billion,

please look at the cut and not the overall rate. if you raise taxes $100 million on american people, they're going to notice it. i doesn't pass the laugh test. >> thank you for being us with again. >> you got it. >> the talk does sound vaguely promising from the president. >> let's rise above the dysfunction and do the right thing together for our country. >> compromise is not a dirty word. >> so will our leaders rise to the occasion and drag us over the fiscal cliff with them or will they compromise? we'll gauge the odds of compromise next. [ female announcer ] need help keeping your digestive balance? align can help. only align has bifantis, a patented probiotic that naturally helps maintain your digestive balance. try align to help retain a balanced digestive system. try the #1 gastroenterologist recommended probiotic.

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to a currency market for everyone. the potential of fxcm unlocked. nyse euronext. unlocking the world's potential. the potential of yelp unlocked. nyse euronext. unlocking the world's potential. this year's fiscal cliff has one thing in common, a failure to reach compromise in washington is threatening to bring the country to the brink of financial ruin again. the world is watching whether america is willing to plunge is self into another financial crisis. there is a solution though. it's one that university of pennsylvania president amy gutman writes about in her book

"the spirit of compromise: why governing demands it and campaigning undermines it." first, a quick history lesson to put the current insanity into context for you. in the book gutman writes about the successful bipartisan tax reform compromise of 1986 in which she writes ronald reagan and the democratic speaker of the house on the right there, tip o'neill, were able to put their minds to governing rather than campaigning. she writes it wasn't easy for them to do it but they did it. they got together and passed significant tax cuts that really benefited many americans. jump ahead to 2010, to the debate over obama care where the compromise in passing the affordable care act occurred only between democrats not a single republican joined them in the vote. amy gutman joins me now. thank you for being us with again. good to see you. in your book, you fault the elected officials for spending most of their time campaigning rather than governing compared to 30 years ago. what's changed? why are elected officials

different now than they were 30 years ago? >> well, as our book foreshadows and i wrote the book with my harvard colleague dennis thompson, we have been overwhelmed by the permanent campaign where every day is election day. and that's the bad news. it's been truly overwhelming and the good news is i think the american people have been underwhel ammed by that. so i think there is a time for change. but what's changed is that the 24/7 media, the influx of unlimited money into politics, the fact that it is easy to stand on principle and demonize your opponents and all that makes the campaigning overwhelm the governing in our democracy. >> paul krogman said the

president shouldn't do anything about the fiscal cliff at the moment. he said, stand your ground, mr. president. don't give in to threats. no deal is better than a bad deal. he said that would put extreme pressure on republicans to make a deal as the economy tanks. we talk a lot about the tea party and extreme views they have on this, but what about pressure from liberals on the president to resist compromise? >> so, i said it before the election, and we say it in our book. you can blame one party more than the other, but in the end, both parties are going to have to compromise. and the victorious party is going to have to make the extreme ends of its party somewhat unhappy in order to make the party, the party of the common good and also to basically rule in a way that helps the vast majority of the american people who are not on the extreme.

so i read paul krugman's column, and it's fine for a pundit. it's fine for activists to want the president or the congress to hold as much ground as possible. but it is misleading to the american people to think that staring the fiscal cliff in the face and saying let's go over it because we're not willing to compromise, is a winning proposition. the president is running no longer for re-election. he's running for history. and he can be historic president if he makes a really good compromise and gets us over this fiscal cliff. >> compromise, as you have written in your book, does actually mean all sides giving something up. amy, thank you for being on the show, thank you for being with us. >> are you ready for the next big shock to the financial system. my next guest oversaw t.a.r.p.

he said, no, we're worse off than before the crisis. how do we prepare for the next financial meltdown if there is one? i'll tell you after the break. oh...there you go. wooohooo....hahaahahaha! i'm gonna stand up to her! no you're not. i know. you know ronny folks who save hundreds of dollars switching to geico sure are happy. how happy are they jimmy? happier than a witch in a broom factory. get happy. get geico. fifteen minutes could save you fifteen percent or more. when you take a closer look... ...at the best schools in the world... ...you see they all have something very interesting in common. they have teachers... ...with a deeper knowledge of their subjects. as a result, their students achieve at a higher level. let's develop more stars in education. let's invest in our teachers...

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powerful medicine relieves pain fast, with no odor. so all you notice is relief. aspercreme. americans have lost faith in their banks. a yearry gallup poll shows confidence at an all-time low. only 21% of respondents say they feel good about u.s. banks this year. look at the trend going back to 1980 from the mortgage meltdown and the subsequent bailout, scandals have tarnished our institutions. billi at mf global, the commodity trader, $1.6 billion of customer money vanished into thin air. hsbc was found guilty of money laundering practices and almost every major bank is under

suspicion after barclay's was suspected. efforts have been made to restore confidence in the system. dodd-frank aims to put an end to too big to fail bailouts while monitoring threats to the consumers and the financial system. president obama vows not to go back on his efforts. >> after all we have been through, i don't believe that rolling back regulations on wall street will help the small businesswoman expand or the laid off construction worker keep his home. >> there are plenty of critics who say dodd-frank didn't go far enough and may have made big banks more dangerous. one of those is neal burail bar. he was assigned to oversee t.a.r.p. about how washington abandoned main street while

rescuing wall street. look at the political donations. look at friends of obama's back in 2008. these are from finance, real estate, and insurance. in 2008, he got more than mccain. in 2012, it collapsed for president obama. he's not getting the support of wall street on regulating anymore. >> there's a couple reasons for this. one, they looked at what mitt romney was offering, which was a tear down of tododd-frank and thought that's probably better for us, but the other thing that is important for the numbers is the tax policy and the fact that barack obama said he was going to increase taxes on the wealthy which happen to be the big donors. romney was talking about lowering those taxes. a lot of that is people voting with their pocket book. >> people say why does corporate america seem upset that barack obama won? it could be there are people who are investors who are upset because it's going to cost them money. >> rich guys want to keep their

mon money. >> let's talk about financial regulation. americans still want to be safe from their financial institutions, and they don't fully feel that way. they don't even partially feel safe. what is your sense? are we able to withstand another financial crisis because while a lot of people say we won't go over the fiscal cliff, we're going to come close with the debt limit again. are we safe? >> we still have banks that are now bigger than they were before the financial crisis. they still don't have adequate capital, that is their own money to shield them from significant losses. and we have government policy which is not doing the required things to make them safe or smaller so if we go off the fiscal cliff or fall off the european cliff, there is a danger of major capital hits that could put us back into a spiral financial crisis. there is that real danger. >> dodd-frank is a big piece of legislation. mitt romney was very clear he would get rid of it. barack obama likes it. what is in there that keeps us safer and what needs to be

fixed? >> one thing that is good is the consumer protection bureau. elizabeth warren -- >> who wouldn't have been running for office if the senate republicans had let her be nominated as head of the bureau, so now they have her in the senate. >> you may have been right the first time with senate democrats because chris dodd is the one who said she was unconfirmable. but any event, that bureau is something that has done really good work, is protecting consumers and having elizabeth warren in the senate to defend that institution from attacks from concongress on its funding is going to be important to watch. that's one of the really good things of dodd-frank is we have an agency now solely dedicated to consumer protection. that's one of the good things. >> good to see you again neil. >> and thanks for joining the conversation on "your money." we're here every saturday at 1:00 eastern and on sunday.